In less than three months, Malta's economic growth forecast for this year has had to be scaled down, a matter that is hardly surprising at a time when uncertainty over the future economic situation is causing so much concern to governments in countries throughout the world.
The forecast growth was first reduced from 2.4 per cent to two per cent and, in one instance, even lower. Earlier this week, the European Commission said in its latest set of forecasts that the growth rate was expected to weaken to just 0.7 per cent. The deficit for 2008 was up, mainly due to the cost of the early retirement scheme for dockyard workers and the rise in the price of crude last year, and the target for a balanced budget has had to be adjusted to take account of the economic stimulus the government plans to give to ease the impact of the downturn.
The eurozone's economy is expected to contract by 1.9 per cent this year and grow by only 0.4 per cent next year, with similar figures for the EU as a whole. In such a fluid economic situation, it is difficult to say how Malta's economy will shape up in the months to come and how long it will take for the economy to pick up the rhythm of growth registered before the outbreak of the storm that hit the financial markets abroad and spawned a recession that is expected to affect both manufacturing industry and tourism.
In the light of this expectation, and of the fact that a number of firms have already been hit, calls are already being made for the government to act quickly on its commitment to launch the economic stimulus programme. Only a few days ago, the president of the Malta Chamber of Commerce, Enterprise and Industry stressed that time was of the essence and that the country needed the stimulus package now.
The call makes a great deal of sense for if the time lag between planning and actuation of the plan is too long, it could very well defeat its purpose. What the Prime Minister has described as a "wide-ranging capital investment programme" ought to be launched without any undue loss of time so as to reduce the impact of the downturn as much as possible.
In launching the programme, however, care has to be taken not to throw overboard all the effort that has been done so far to cut unnecessary expenditure. That aim has to be kept intact and, in line with this commitment, the plan by Social Policy Minister John Dalli to cut unnecessary costs in the running of the medical services ought to be fully supported by all. The exercise ought to be extended to other areas of the public service as well as in corporations, where, with greater management efficiency and expenditure control, costs could be reduced.
In its last report on Malta, the International Monetary Fund had, for instance, specifically mentioned the need to roll back "an over-extended" public sector. It is time, also, to see whether Malta can afford all the quangos that have mushroomed over the years.
As the island braces itself to meet the impact of the downturn, it is at least somewhat heartening to learn that, according to European Commission figures, Malta is expected to perform better than the EU average. But since "better" in this context is no substitute for recovery, the effort to regain the growth rhythm would need to be doubled.